Stock Market Rally: Will the Surge in 2023 Lead to a Payback in 2024?
Originally Published 2 years ago — by MarketWatch
Market strategists are warning that the recent rally in U.S. stocks, which led to five straight winning weeks for major indexes, may have caused equities to become overbought and could signal a potential payback in early 2024. The rally, driven by expectations of a "soft landing" for the economy after aggressive interest-rate hikes, has also seen a broadening of the market rally across different market capitalizations. However, strategists caution that financial markets have shown a tendency to get overbought and oversold quickly in recent years. Investor sentiment has been optimistic, with bullish sentiment reaching its highest level since August, while bearish sentiment has decreased to its lowest level since January 2018. Despite the increase in bullish sentiment, some analysts believe that investors are not truly bullish but rather see little near-term downside risk. The market may be vulnerable to small disappointments after a strong one-month rally, and a period of consolidation may be necessary.